Car accidents are stressful for everyone involved. The injured victim needs money to pay mounting medical bills and replace lost wages, while the person responsible for the accident usually fears losing a lawsuit. For these reasons, both sides are tempted to settle a car accident dispute quickly before they’ve had a chance to think about their best options.
However, if you were injured in a Houston auto accident, don't accept the first settlement offer you receive for a car crash. Instead, discuss your case with a Houston car accident lawyer before agreeing to any settlement!
The First Settlement Offer Will Be a Lowball Offer
Picture this: you were just in a rear-end car accident on Interstate 45 and are recovering at home, wondering how you'll pay your rent or mortgage now that you can't work. You're laid up with broken bones and in considerable pain, worrying about your family's financial future. Suddenly, the telephone rings and a kind voice on the other end says they are an insurance adjuster with great news! They want to offer you a car accident settlement of $2,000. They can rush the papers over to you right away. When you sign the settlement agreement, they'll deposit your check straight into your account on the next day.
Think this is a dream come true? Think again.
Chances are, this first settlement offer is much less than your injuries are worth—and the insurance adjuster knows it. They know that people may be desperate to get a check in their hands while their financial stresses mount. So, they offer a low first settlement amount, hoping that a scared and unknowing car accident victim will accept it.
What Happens When You Accept the First Settlement Offer?
There's a catch. Once you agree to the low settlement, you’ll lose your ability to get fair compensation for your injuries. Before you get the check, you have to sign a waiver that states you cannot pursue additional compensation related to that particular accident. If you accept too little, there is not much you can do to fix the situation in the future when you may need additional funds you didn't consider at the start.
There's a very simple reason insurance adjusters make lowball first offers. Before calling or visiting you, they already have a settlement range in mind regarding how much they can offer you. An insurance adjuster will never make a first settlement offer in the middle or high end of that range. Instead, they'll start low and give themselves room to go up. So, while an insurance adjuster might really think your injuries are worth $30,000, the first settlement offer will not be even close to that number.
While you might not be familiar with insurance company processes, settlement ranges, and how offers work, an experienced Houston car accident attorney knows what is fair. This is the advocate you need on your side from the very start of the process to advise you when an offer is too low.
How to Estimate the Value of Your Personal Injuries
Before you can decide whether a first settlement offer is too low, you need some sense of how much your injuries are worth. Some injuries are easy to calculate, such as medical expenses, rehabilitation costs, lost wages, and repairs to your car. You can put a dollar amount on these economic damages. The insurance adjuster will add up these costs—and so should you. Never simply trust that the adjuster’s math is correct.
Under Texas law, you might also be entitled to non-economic damages, though they are harder to calculate.
For example, car accident victims in Houston can request compensation for:
- Pain and suffering
- Emotional distress
- Lost companionship
- Lost future earning capacity if you can't return to your current job or any job at all
These are intangible losses, so there is no inherent dollar amount to add up, such as with medical bills. Instead, a skilled accident injury lawyer can use other evidence to determine the value of your pain, suffering, and other non-economic losses.
Some insurance companies use a multiplier method to make an offer for non-economic damages. For example, they might take your economic damages (medical bills and lost wages) and multiply them by three to calculate your non-economic compensation. This method can grossly underestimate what you deserve for your pain and suffering, especially if you have a severe injury with lasting effects. Never rely on the insurance company to tell you what your damages are worth.
Every situation is different, and only an experienced auto accident attorney can appropriately analyze your unique circumstances to determine how much you are likely to receive as compensation. Based on this analysis, your injury attorney will come up with a settlement range that fairly compensates you for the accident's impact on your life.
What Happens When You Reject the First Settlement Offer?
When you receive the insurer's first settlement offer, you should probably reject it. After all, the insurance agent is prepared to negotiate. Instead, your lawyer should come out swinging. Consider making a counteroffer by starting at the high end of your range.
For example, if you estimate that your injuries are worth $40,000 to $70,000. Don't counter-offer with $40,000 because you'll have nowhere to go. Also, don't counter with $55,000 since that doesn't give you much room to maneuver, either. Instead, you might counter with close to $70,000, which is the upper end of what you consider a fair settlement.
Negotiating a car accident settlement is a lot like negotiating the purchase price of a car at the dealership. Each side goes back and forth, moving in increments until they reach a number that is acceptable to both. At each stage of the negotiation, you’ll explain why you are entitled to the requested amount by providing information about your economic and non-economic damages.
What if the second settlement offer is still too low? What if you can’t reach an agreement? Don’t worry! A settlement is entirely voluntary. If an insurance company decides to play hardball, you can always walk away from settlement negotiations and file a lawsuit in the court system. You’re never forced to settle against your will, and your lawyer can’t accept a settlement offer without your permission. The choice is always yours.
The Dangers of Settling Too Soon
A settlement has many advantages over going to trial. You can guarantee that you’ll receive some money and you can usually get your money faster. However, there are clear dangers of settling too soon, such as:
Your injuries haven’t healed. If you suffered a traumatic brain injury, for example, it might take a long time to figure out how much money you’ll need for your future medical care. In this situation, you might need to wait before settling until you have determined what treatment you'll need so you have a better idea of how much money you'll need.
Once you settle, you can’t sue. When you sign your settlement agreement, you also are signing away your right to sue for the injuries you suffered in the accident. After all, an insurer has no incentive to settle with you if you can turn around and still sue them in the future. Sometimes, it might be better to sue in court than settle your dispute, especially if the company refuses to extend a reasonable settlement offer.
Settlement Negotiations Can Continue After You File a Lawsuit
Some people do not want to reject the insurance company’s offer and file an injury lawsuit because they are nervous about the idea of going to court. However, just because you start litigation does not mean your case will end up at trial in front of a jury. In fact, most Houston car accident lawsuits never go to trial.
Part of the litigation process involves ongoing settlement negotiations between your attorney, the defendant (the person responsible for the crash), and the defendant’s insurance company. These negotiations can continue throughout the entire litigation process - up to the moment the jury makes a decision.
But how are these settlement negotiations different from negotiating directly with the insurance company during your initial claim? Here are the reasons:
The Discovery Process Can Lead to a Settlement
First, litigation has different steps. One of these is called discovery. This is the exchange of evidence between the parties. The lawyer for the defendant and insurance company will ask your lawyer for all the evidence you have to prove your claim. Likewise, your lawyer will ask for all the evidence the insurance company plans to use to defend against the claim.
Having all the relevant evidence on the table can help negotiations because each side sees what the other side is working with. If you have strong evidence to support your case, the insurance company might realize that you are likely to win. This can make them more likely to resolve the matter without proceeding any further through the litigation process.
Discovery can be a powerful tool to demonstrate how a jury will probably rule, which can convince the insurance company to offer a settlement amount you truly deserve.
Insurance Companies Usually Want to Avoid a Trial
Once you file your lawsuit, the possibility of going to trial becomes very real. If you cannot reach an agreement out of court, the court will schedule your case for the trial docket. Both sides will need to put in the time and effort to prepare their cases, which can be an extensive process.
Settlement saves everyone resources for trial preparation and going to court, so this can be an incentive for an insurance company to offer a favorable settlement agreement even if it refused to do so previously. You'll need an experienced litigator handling your case so the insurer knows you are serious about taking the case to trial if you have to.
It's Usually Best to Settle on Your Own Terms
When a case goes before the jury without settling, the jury will listen to all the evidence and arguments according to civil trial procedures. Then, this group of people with little to no knowledge of the legal system have the fate of the parties in their hands. If all goes well, the jury can decide completely in your favor and award even more than you expect for your damages.
On the other hand, the jury can decide that the defendant was not liable, rule against you, and you get nothing. There is no telling what a jury will decide in many cases until they read the verdict. At that point, you cannot go back and accept a settlement offer.
It is often in the best interest of all parties to settle outside the courtroom. When you negotiate a settlement agreement, you know exactly what you are agreeing to, and the insurance company knows exactly what they will have to pay you. This can be highly preferable to the uncertainty of trial.
Take the following scenario:
- A car accident attorney requests at least $350,000 for their client’s damages in settlement negotiations.
- The insurance company refuses to pay more than $100,000, which is much less than the injury victim deserves.
- They cannot reach an agreement, so the case proceeds to trial.
- The jury finds that the insurance company owes the plaintiff $750,000 for their losses.
Because the insurance company would not agree to a reasonable settlement, it ended up paying much more in the end.
Insurance companies and their attorneys go to court all the time. They know the drill and they know the risks of taking a case to trial. Often, an insurance company will settle during litigation unless it really believes:
- That the defendant was not the liable party
- That the plaintiff’s injuries are much less serious than the plaintiff claims
- That the settlement demands of the plaintiff are highly unreasonable, and the plaintiff refuses to budge in negotiations
Even with all this in mind, when you file a lawsuit, there is no guarantee that the case will settle. It is important to have an attorney who will not push you to accept a settlement that is too low simply to avoid going to trial and end the process. Instead, you want an advocate who will fight for the compensation you deserve all the way to the end if necessary.
Speak With a Houston Car Accident Lawyer About Whether to Accept an Insurance Company Settlement
Settlement negotiation is an art form, and an experienced car accident attorney knows how to reject an offer and when to accept one. If you've received a first offer from an insurance company for a car accident, speak to one of our Houston car accident lawyers as soon as possible. At Stewart J. Guss Injury Accident Lawyers, we’ve helped countless Houston car accident victims get the compensation they deserve for car accidents that were no fault of their own.
For your free initial consultation with our team, call today at 800-898-4877 or send us an email through our online contact form. You’ll pay us nothing up front and nothing at all unless we win your case.